B. of A.: Facebook graph search could be ‘overhang’ for Google

DanGallagher

The Nasdaq Composite
COMP, -0.94%
rose 7 points, or 0.2%, to close at 3,118, while the Philadelphia Semiconductor Index
SOX, -1.17%
added 1.2%. The Morgan Stanley High-Tech Index was up a fraction.

Apple
AAPL, -1.54%
which has a heavy weighting on the Nasdaq, jumped 4.2% to close at $506.09. The stock has been under heavy selling pressure of late, losing nearly 7% over the last two trading sessions on worries about potentially slowing sales of its iPhone 5.

Several brokers issued positive notes on Apple before the open, pointing to strong results expected for the first fiscal quarter; the company will report next week. Katy Huberty of Morgan Stanley wrote that recent concerns about iPhone sales “are overblown,” and she reiterated her overweight rating and $714 price target on the stock.

That helped to offset a downgrade by Pacific Crest — the second notable downgrade the highly favored stock has seen over the past month.

Analyst Andy Hargreaves lowered his rating on Apple to sector perform, or neutral, citing “evidence of high-end market saturation” as the primary reason for the move. “We believe the high ends of the smartphone and tablet markets are quickly becoming saturated, which is likely to limit Apple’s growth by pressuring unit volume and driving a mix shift to lower-margin product.”

Google Inc.
GOOG, -0.73%
slipped 1.3% to close at $715.19. Following the introduction of Facebook’s “graph search” tool the previous day, some analysts speculated on the potential impact to Google’s core Web search business.

“As of now, we do not see Graph Search as a threat to Google Web search,” wrote Justin Post of Bank of America/Merrill Lynch in a note to clients, adding that “looking forward, Facebook Graph searches could be competitive with certain categories of Google searches, such as Places and Maps.”

He said Facebook remains “a small overhang” on Google’s shares. He lifted his price target on Facebook
FB, -1.18%
to $35 from $31. Facebook shares were last trading down a fraction as other analysts issued mixed reactions on the new graph search feature. Read: Facebook graph search gets muted reviews.

Is 'graph search' a money maker?

(4:30)

Is Facebook finally in position to make money in a way that pleases investors?

Yelp shares
YELP, -0.08%
fell 1.2% to close at $20.36 after Northland Capital downgraded the stock to an underperform rating, saying the new Facebook feature is “highly competitive” to Yelp’s core business.

Dell shares
US:DELL
fell 4.3% to close at $12.61 after gaining more than 20% over the previous two session on rumors that the PC maker may go private.

Shares of Yahoo Inc.
YHOO, -1.15%
jumped 2.8% to close at $20.07, possibly on speculation about IPO plans by Alibaba, though the Chinese company flatly denied a Bloomberg report that it is making such plans.

Shares of Hewlett-Packard
HPQ, -1.30%
also rose 4.1% to close at $17.21 after a Wall Street Journal report citing unnamed sources that potential buyers have expressed interest in acquiring Autonomy Corp. An H-P spokesman said the company doesn't comment on speculation.

Also in the red were shares of Netflix Inc.
NFLX, -1.39%
which shed 4% to close at $97.48.

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